MercoPress. South Atlantic News Agency

Chirac & Kirchner meeting.

“The president stressed the importance of a rapid settlement of difficult cases, in particular for companies dealing with public services,” said Chirac's spokesman, Jerome Bonnafont, referring to Aguas Argentinas and Edenor, a unit of Electricité de France.

"It is vital to do this so as to do away with anything that could affect the confidence of French investors wishing to set up in Argentina," added Bonnafont, briefing reporters after a meeting between the two presidents in Paris. An agreement on rates was "critical," said Bonnafont.

The Argentine government had a slightly different version of the conversation between Kirchner and Chirac.

According to Cabinet Chief Alberto Fernández, Chirac told Kirchner that the row between the government and Aguas Argentinas is "just a stone in the shoe" and that the bilateral relationship has to get over it soon.

Kirchner, Argentine government sources said, limited his reply to saying that his government "defends the interests of the people of Argentina."

"Chirac said the incident with the water company should by no means harm the bilateral relationship and told the President that he should feel free to scrap the contract if he believed that was the right thing to do," said Fernández after the meeting.

The Kirchner government has angered the firms when it fined them a week ago for cutting services during a recent heat wave and not keeping up investments to meet demand. The government last week urged Aguas Argentinas to pay them over 60 million pesos it owes in fines.

French newspapers reported on the eve of Kirchner's arrival in Paris that Suez was considering pulling out of Argentina. Discussions between Suez and government officials, however, continued yesterday and no decision had been reached yet.

Argentina froze utility prices in 2002 to help the thousands who slid into poverty during the country's economic meltdown. But Kirchner is under pressure from European governments and the International Monetary Fund to update the rates as part of the drive to get the Argentine economy back in favour with investors.

Kirchner has blamed energy and utility companies for power failures in the past year and said they failed to invest sufficiently. More than 20 Argentine utilities filed complaints in a World Bank court saying their contracts had clauses allowing them to raise prices in the event of a currency devaluation.

The talks with the French utilities will continue today. Kirchner has appointed De Vido and Lavagna for the job.

Argentine Economic Minister Lavagna said yesterday that the government is willing to allow the French-owned utility companies to hike rates by 16 percent in exchange for additional investment of some 250 million pesos. Lavagna said the companies want to hike rates by 60 percent.

Yesterday, De Vido announced that French oil company Total had agreed to invest 400 million dollars to exploit gas in Tierra del Fuego, Argentina's southernmost province, in Patagonia.

But Chirac and Kirchner also spoke about broader economics during their 45-minute meeting at the Elysee Palace in Paris. Chirac said he backs Argentina's effort to reschedule payments on some 100 billion dollars of debt in default. Chirac, 72, "expressed support for Argentina, particularly within global financial institutions," said Bonnafont, the French president's spokesman.

Chirac's support contrasts with criticism by Italian officials and holders of Argentina's bad debt, who have bashed the Kirchner government proposal to pay investors the equivalent of 25 cents per dollar of defaulted debt.

About 450,000 Italian investors hold 14.5 billion dollars of the bad debt, making Italy the largest holder of the bonds outside Argentina. Virtually no French investors, on the contrary, have Argentine bonds in their hands.

"Chirac said that he will continue to support Argentina's position in multilateral lending agencies," said Fernández, the Cabinet chief.

It was the second meeting between the two presidents. The first was in July 2003. The Argentine President also invited his French counterpart to visit Argentina. Chirac made a State visit to Argentina in March 1999 during then president Carlos Menem's tenure. Yesterday, Chirac told Kirchner that he would check his timetable to accommodate a trip to Argentina "as soon as possible." No date, however, was officially announced for the visit.(BAH)